U.S. EPA to slash biofuel waiver program, mulls other measures to help refiners: sources

(Reuters) - The Trump administration has decided to drastically scale back the U.S. Environmental Protection Agency’s program exempting small oil refineries from the country’s biofuel regulations after a court case cast doubt on the legitimacy of the program, according to a person familiar with the matter.

The agency, meanwhile, is discussing the possibility of instituting a cap or other restrictions on the price of biofuel blending credits, called RINs, that refiners must acquire to show compliance with the biofuel regulations, two other sources said. Such a move would serve as compensation to the oil industry if the lucrative waiver program went away.

The sources said the possibility of price controls was discussed in an EPA meeting earlier this week with officials from the White House, the Department of Energy, and the Department of Agriculture, but it was unclear if the administration would ultimately adopt the idea.

An EPA spokeswoman did not immediately respond to a request for comment.

The potential changes mark the latest twist in the controversial U.S. biofuel program, which has driven a wedge between the oil industry and Big Corn – two crucial political constituencies for Republican President Donald Trump as he seeks reelection.

The U.S. Renewable Fuel Standard requires refineries to blend billions of gallons of biofuels such as ethanol into the country’s fuel pool, or buy credits from those that do, something that has created a valuable market for corn but which refiners say is too costly.

Since the adoption of the RFS, the EPA has granted waivers to small refiners exempting them from their obligations if they prove compliance would cause them financial distress. The Trump administration has roughly quadrupled the number of exemptions since it took office.

In January, the U.S. Court of Appeals for the 10th Circuit cast doubt on the program, saying the EPA overstepped its authority to grant several waivers in the states where it has jurisdiction because the refineries had not received exemptions the previous year.

The court said the RFS wording requires that any exemption granted to a small refinery after 2010 must take the form of an extension.

The bulk of waivers granted to oil refineries by the EPA in recent years do not meet that standard. According to EPA data, the agency granted seven biofuel waivers in 2015. That number rose to 35 in 2017 – meaning 28 waivers were handed out without having been given in a previous year.

Senators representing the oil industry have urged the EPA to appeal the decision, saying that if the court’s opinion is applied nationally, only two refineries would qualify for waivers.

EPA Administrator Andrew Wheeler had told lawmakers during a hearing on Wednesday morning that the agency expects to make an announcement on the waiver program soon and that he hoped the decision would “quell” the market for RINs.

Reporting by Stephanie Kelly in New York and Jeff Mason in Washington; Editing by Richard Valdmanis and Rosalba O’Brien